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spk02: Good afternoon. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the OLO Third Quarter 2021 Earnings Conference Call. All lines have a place on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I'll now send the call over to OLO's VP of Investor Relations, Ms. Stephanie Dalkus. Please go ahead.
spk01: Thank you. Good afternoon, everyone, and welcome to OLO's third quarter 2021 earnings conference call. Joining me today are Noah Glass, OLO's founder and CEO, and Peter Benedides, OLO's CFO. During our call today, some of our discussion and responses to your questions may contain forward-looking statements, which represent our beliefs and assumptions only as of the date statements are made. These forward-looking statements include, but are not limited to, statements regarding our expectations of our business, future financial results, and guidance and strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our risk factors included in our SEC filings, including our quarterly report on Form 10-Q for the quarter ended September 30, 2021 that will be filed with the SEC following this earnings call. You should not rely on forward-looking statements as predictions of future events. We undertake no obligation of updating any forward-looking statements made during this call to reflect events or circumstances after today. Also, during this call, we'll present both GAAP and non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release which we issued a short while ago. This earnings release is available on the investor relations page of our website and is included as exhibit in the form AK, furnished to the SEC. Finally, in terms of our prepared remarks or in response to questions we may offer incremental metrics, please be advised that this additional detail may be one time in nature and we may or may not provide an update in the future on these metrics. I encourage you to visit our investor relations website at investors.olo.com to access our earnings release periodic SEC reports, a webcast replay of today's call, or to learn more about OLO. With that, let me turn the call over to Noah.
spk04: Thank you, Stephanie. Hi, everyone. Thank you for spending time with us today. In the third quarter, OLO's strong revenue growth and profitability momentum continued as we took meaningful strides toward our vision of digital entirety, touching, adding value to, and deriving revenue from every restaurant transaction. We drove digital transactions across every service model, takeout, delivery, drive-through, and on-premise, while announcing new tools to enable brands to both realize the promise of digital hospitality and improve key facets of their businesses as truly customer centric and data informed enterprises through the recent acquisition of Wisely. Our platform supported year over year growth in transaction volume. We increased our product portfolio and use cases. We added new and expanded existing restaurant relationships and we grew our technology partner ecosystem. This quarter, Our ending active location count increased 26% year-over-year to approximately 76,000 locations. Notably, we also celebrated the milestone of welcoming our 500th restaurant brand, further increasing the critical mass of Olo's exclusive restaurant network of marquee and must-have restaurants. I'm excited and honored that so many restaurant brands have selected Olo as their on-demand platform and digital transformation partner. We also continued our mission to help restaurant brands thrive by best meeting the needs of the on-demand consumer. Meeting the needs of the on-demand consumer extends beyond deploying resources for order taking, and it extends beyond our ambitions of digital entirety. In fact, it extends beyond transactions. Meeting the needs of restaurant brands and the on-demand consumer requires a customizable technology solution with fine-grained controls. leading to operational efficiency that enables brands to focus on their guest experiences, both off-premise and now on-premise as well. As guests increasingly return to on-premise dining, our Open SaaS platform provides restaurant brands with solutions to best serve their guests and enables brands to better manage their enterprise and flexibly respond to industry developments. With the integration of Weisly's products, our platform will harness data from all customer interactions, including non-digital orders, enabling brands to further build direct relationships with their customers. Olo is, and always will be, the restaurant industry's true digital partner, aligned with restaurant brands' best interests in mind. Quarter over quarter, we continue to add new brands to our platform, as restaurant brands recognize our ability to partner and add value for them. This quarter, we were proud to welcome a number of restaurant brands, including CKE and Dave's Hot Chicken. CKE, parent to leading QSR brands Carl's Jr. and Hardee's, re-platformed from a fragmented technology stack, leveraging the OLO ordering module to implement a highly customized and personalized digital program to meet the evolving needs of the customers. Ordering allows brands to forego the cost of building, maintaining, and securing their own digital ordering and delivery platforms, while retaining direct relationships with their customers and maximizing profitability. Dave's Hot Chicken, a fast casual brand, adopted the Ola ordering, dispatch, rails, and network modules. Dave's Hot Chicken's implementation of Olo as their brand's on-demand commerce solution of choice provides their customer with the convenience to order across multiple digital channels and gives Dave's Hot Chicken the operational ability to prioritize the most profitable digital ordering channels. As the brand experiences rapid growth, Olo's scalable technology is able to grow with the brand and serve as a true digital partner. In addition to launching with new restaurant brands, we further grew our engagement with existing restaurant brands. I've previously discussed Olo's historical success and demonstrable ability to grow within our restaurant base through the development of products that our restaurants value. Most recently, I discussed this on our wisely acquisition call just a few weeks ago. OLO's collaborative approach with our restaurants and our product advisory council specifically yields inherent product-market fit, which manifests in high uptake. Our highly efficient go-to-market motion that enables us to deploy our modules across all new and existing brand locations without incremental sales and marketing costs and upsell new offerings to the brand itself rather than each individual location, further drives our upsell success and related ARPU growth. And I'm excited to provide two examples of this sales motion, Bojangles and Denny's. Bojangles, a leading QSR brand, previously deployed the OLO Rails module and recently launched the OLO ordering module with a custom website and app. Bojangles' adoption of multiple OLO modules represents our ability to best meet the needs of the on-demand consumer. Longtime partner Denny's, a top family brand, previously implemented all three of OLO's core modules, ordering, dispatch, and rails, as tools to help unlock off-premise sales and improve the customer experience through direct channels. This quarter, Denny's expanded its adoption of OLO solutions by adding the OLO Network module. Network allows restaurant brands to take orders from non-marketplace digital channels, such as Google Food Ordering, which enables restaurants to fulfill orders directly through Google search results and Maps pages. Network further enables digital ordering for restaurants and derives additional transactional revenues for OLO. This quarter, we also continued our success with virtual and delivery-only concepts, enabling virtual dining concepts NASCAR Refuel brands to quickly deploy their delivery-only dining experience to their large group of followers. NASCAR Refuel allows fans of the auto racing spectator sport to have the opportunity to enjoy the most iconic NASCAR dishes any time of the year at home. OLO's partnership with NASCAR ReFuel and other virtual dining concepts brands such as Mr. Beef Burger and Buddy B's Cake Slice gives restaurants a complete and quickly deployable technology solution in order to maximize restaurant profits. We believe that our open SaaS platform provides restaurant brands with a flexible technology stack by aligning our solutions with the needs of the restaurant, giving each restaurant brand the power to curate their optimal technology stack from a portfolio of solutions in conjunction with solutions from Olo's open ecosystem of over 100 technology partners. As an example, Roll'em Up Taquitos, a fast casual brand, announced in September that it would add five new technology vendors to offer products and services to Roll'em Up Taquitos' rapidly growing franchise base. These partnerships, which included Olo, bolster the fast-growing brand's digital presence. Rollemult Taquitos believes that partnering with these vendors was important as the restaurant industry relies heavily on technology in order to provide the best quality of services and experiences for its customers. And we couldn't agree more. Restaurants are having to adapt to new and complex challenges and are using technology as a solution. Holo's fully customizable technology stack and open SaaS platform keeps restaurants well-equipped not only best serve their customers, but also to flexibly respond to industry trends, whether transitory, such as labor shortages, or permanent, such as the on-demand consumer. We continue to invest to help our brands transition to digital, as well as deal with transitory labor challenges. Two tools that address this are the OLO Switchboard Module and the OLO Expo Module. Switchboard is a solution that helps restaurant brands to manage phone ordering. Switchboard allows call center agents to place orders through OLO's dashboard. The Switchboard interface seamlessly routes orders to the necessary locations to begin preparation. Orders placed through Switchboard arrive at the store the same way any order placed through other modules would be sent down to the store for pickup or delivery. Switchboard call center functionality alleviates staff shortages while allowing restaurants to continue to take orders by phone. Expo is a tablet-based software solution to enhance the front-of-house workflow of store locations using Ola's PLS-integrated platform. Expo reduces pain points associated with managing digital programs, allowing interoperability between front-of-house and back-of-house teams. and consolidating orders regardless of how orders are placed and how they are handed off. This allows restaurants to better address labor challenges as well as supply chain challenges. Almost 10,000 restaurant locations already utilize Expo, enabling these restaurants to utilize OLO as a force multiplier and flexibly address temporary industry challenges. These examples demonstrate our platform's ability to increase functionality, improve store operations, and ultimately address myriad business issues within the restaurant. Just as our sophisticated on-demand commerce platform enables brands to choose from a broad set of capabilities, our open partner ecosystem of over 100 best of breed restaurant technology partners allows brands to fully customize their technology stack, whether directly through our platform or together with our partners. Olo is committed to operating as an open ecosystem with the freedom of technology choice for restaurants to better serve them and enable brands to better manage their enterprise. We've created a two-sided network consisting of 76,000 restaurant locations and a partner ecosystem of over 100 restaurant technology partners. This creates a flywheel. in which adding a new restaurant to our restaurant network benefits all OLO partners, and adding a new technology partner to our partner network benefits all OLO restaurants. And we continue to strengthen this ecosystem by expanding our partnership network. This quarter, we expanded relationships with existing technology partners, Uber and Waiter, adding both partners to the OLO dispatch network. Dispatch is a delivery as a service solution that allows restaurants to offer and expand delivery for orders generated via their own websites and apps through a network of more than two dozen delivery service providers, or DSPs. With the expansion of Dispatch's network of DSPs, restaurant brands on Ola's network will have an expanded network of delivery partners, more competitive pricing, differentiated service hours and more driver redundancy increasing driver availability on the dispatch network this is imperative for restaurants as it allows them to satisfy growing customer demand for food delivery without the complications of managing their own drivers and open new revenue channels through a direct digital experience finally i'm pleased to share an update in connection with our olo for good initiative We launched OLO for Good earlier this year and joined the Pledge 1% movement, committing to donate 1% of our time, equity, and product to doing good. As part of that, we committed to donating 1% of OLO shares over 10 years to our independent donor-advised fund managed by the Tides Foundation. I'm thrilled to share that recently the Tides Foundation has granted $4.9 million in total from our donor advised fund to the following nine organizations. Black Girls Code, Clean Air Task Force, Emma's Torch, Feeding America, Food Corps, Girls Who Code, Giving Kitchen, the Let's Empower Employment Initiative, and Natural Resources Defense Council. These grant recipients are organizations that align with our OLO for Good pillars, advancing all aspects of diversity, equity, and inclusion, providing relief and support for the restaurant industry and its frontline workers, ending childhood hunger and increasing access to food, and protecting natural resources and reducing waste and emissions. We expect to have an annual grant cycle going forward, and I'm optimistic and enthusiastic about our ability to use OLO as a platform for social impact and positive change for our communities. To summarize, I am extremely proud of our third quarter results and our ability to enable restaurants during this period. As on-premise transactions increase in the wake of restaurant reopenings and restaurants struggle to staff their dining rooms, Ola will continue to be a force multiplier for restaurants, enabling them to do more with less, allowing technology to step in where possible, and supporting restaurants to thrive and benefit from the restaurant industry's digital transformations. And now I'd like to turn things over to Peter Benavides, OLO's CFO, to share more details on OLO's third quarter performance. Peter? Thanks, Noah. Today I'll review our third quarter fiscal 2021 results in detail and provide guidance for the fourth quarter and full year fiscal 2021. Total revenue in the third quarter was $37.4 million, up 36% year-over-year. Platform revenue in the third quarter was $36.1 million, up 38% year-over-year, primarily due to an increase in active locations coming onto the platform and further increases in ARPU due to continued multi-product adoption, multi-partner adoption, and increased transaction volumes. In terms of key metrics, we ended the quarter with approximately 76,000 active locations on the platform, a 26% increase year over year and a 3% increase sequentially. As Noah mentioned, this included deploying a number of new brands such as CKE and Dave's Hot Chicken, amongst others. Our food for the third quarter was approximately $484, representing an 8% increase year over year and roughly flat quarter to quarter. Year-over-year growth in ARPU was the result of further increases in multi-product and multi-partner adoption and increased transaction volumes. Specific to transaction volumes, we were pleased with the continued durability of digital orders in the third quarter. Despite seasonality effects we typically see in the third quarter, continued return to in-person dining, and transitory labor challenges, digital ordering proved durable with volumes exceeding expectations. Lastly, net revenue retention remained strong in excess of 120% for the third quarter, as we successfully upsold to existing clients, such as Bojangles and Denny's, which Noah mentioned earlier. While we have observed strong upsells throughout this year, we have also experienced new customers subscribing to more than one product from the onset of their relationship with Ollo. While this drives higher ARPU, it leaves less room for net revenue retention expansion. That said, we anticipate strong gross retention, continued product development, and increased transaction volumes, factors supporting strong net revenue retention over the long term. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. Gross profit for the third quarter was $30.2 million. representing a gross margin of 81% compared to a gross margin of 83% a year ago. Platform gross margin for the third quarter was 84%. This compares to platform gross margin of 87% a year ago. As expected, the year-over-year decrease in gross margin was driven by an increase in headcount and associated compensation costs to support the rapid growth in transaction volumes and active locations added to the platforms. Sales and marketing expense for the third quarter was 4.2 million, or 11% of total revenue. This compares to 1.9 million and 7% a year ago. As expected, on a dollar basis, increases in sales and marketing spend were driven by continued expansion of our sales, marketing, and business development teams in an effort to continue to add more locations to the platform, increase upsell and retention efforts, and expand our partnership ecosystem. Research and development expense for the third quarter was 11.9 million, or 32% of total revenue. This compares to 7.5 million and 27% a year ago, reflecting our continued commitment to investing in innovative solutions to support the rapidly evolving needs of our customers. General and administrative expense for the third quarter was 9 million, or 24% of total revenue. This compares to 4.8 million and 17% a year ago, As expected, on a dollar basis, increases were primarily tied to increased costs and headcount associated with operating as a public company. Operating income for the third quarter was $5.1 million compared to $8.8 million a year ago. Net income in the third quarter was $5 million or $0.03 per share based on approximately 185.1 million fully diluted weighted average shares outstanding. Turning our attention to the balance sheet and cash flow statement, our cash, cash equivalents, and marketable securities balance was $597.7 million as of September 30th, 2021. This total does not reflect the $77 million of cash paid in conjunction with the acquisition of WiseWeek, which closed on November 4th. Regarding cash flows, operating cash flow was $10.7 million compared to $4.1 million a year ago. Free cash flow was $10.2 million compared to $3.5 million a year ago. I'll wrap up by providing our guidance for the fourth quarter and full year 2021. For the fourth quarter, we expect revenue in the range of $38.8 million to $39.3 million and non-GAAP operating income in the range of $2.8 million to $3.2 million. For the fiscal year 2021, we expect revenue in the range of $148.2 million to $148.7 million and non-GAAP operating income in the range of $19.8 million to $20.2 million. I would like to highlight a few things to keep in mind about our outlook. We closed our acquisition of Wisely on November 4th. and therefore have included contributions of $1 million of revenue and $800,000 of non-GAAP operating loss in our guidance numbers for the quarter. Secondly, we remain prudent in our approach to forecasting given evolving industry dynamics. Specifically, anticipated factors such as the residual impacts from COVID-19 and seasonality effects and transitory impacts due to continued industry labor challenges That said, the underlying fundamentals of the business, a strong sales and deployment pipeline, durability of digital ordering, growth in the partnership ecosystem, and continued product innovation has us extremely excited for the path ahead. To summarize, we're extremely proud of our financial performance this quarter. which we believe reflects our continued ability to execute on our vision and the opportunity ahead. And we're even more excited about our position, the market opportunity ahead of us, and the impact we can have in helping our restaurants thrive while navigating the industry's evolving landscape. With that said, I'll turn things back over to the operator to begin Q&A. Operator?
spk02: If you would like to ask a question, please press star 1 on your telephone keypad now. you'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star 1 on your Stifle keypad now.
spk03: Our first question comes from Brad Redbeck from Stifle. Please state your question. Great.
spk04: Thanks very much. Maybe for Peter, starting off, ARPU flattened quarter over quarter versus being down last quarter. Should we take this as sort of a point of stability, especially with wisely being added in the opportunity for growth to re-accelerate there? Hey, Brad, thanks for the question. Yeah, I think that's a great takeaway. You know, we were really pleased with our pre-performance this past quarter. It was in line with our expectations, but in fact exceeded our expectations, I think, due to the durability of digital ordering that we covered during our prepared remarks, and that obviously contributed to the outperformance on the quarter. So as we look ahead, we see more stability and growth in ARPU as a result of durability of digital ordering, as well as the wisely suite of products that we have now to sell into our existing customer base. That's great. And then I'm not sure for you, Peter or Noah, but As we think about the last six quarters, it's been a bit of a wild ride. As we look forward, what should we think of as the durable growth rate of the business? Yeah, I can take that one, Brad. This is Peter again. Yeah, as we look ahead, we see a lot of opportunity for growth and a lot of different levers to pull to get there. I think in the most simplest form possible, continuing to add more active locations to the platform. We've shared over previous quarters the momentum that we've started to gain in terms of the QSR segment. Again, that is the segment of the industry that really excites us from a location standpoint, as well as the amount of transactions that are processed within that segment of the restaurant industry, which obviously bodes well for our transactional SaaS model. In terms of ARPU, a lot of levers to pull there in terms of future multi-product adoption, multi-partner adoption, and growth in transaction volumes. To date, for this past quarter, according to NPD, digital transactions accounted for about 16% of overall industry transactions. a lot of opportunity for growth ahead in digital ordering, and we're excited about that path forward. Great. Thanks very much. Congratulations.
spk03: Our next question comes from Brent Breslin from Piper Sandler. Please state your question.
spk04: Hi, this is Court Jeffries on for Brent. First question is, you know, I think discussions of supply chain issues have really permeated to areas of the economy far beyond what I think most have anticipated. And I appreciate the color on the product behavior changes that restaurants are making to respond to labor shortages. I was wondering if you could just level set for us what you're expecting in terms of seasonal volumes for the first quarter and if there's any kind of concern on inventory or if they feel more insulated at this point. Yeah, I can take that. This is Peter here. So in terms of order volumes, what we're seeing throughout the first few weeks of the quarter is really aligned with what we shared in our prepared remarks, which is continued durability in digital ordering. The one thing I would call out is, which is typical, for November and December months is just the seasonality impact given the holiday period. So as we think about Q4 digital ordering trends, those are all factors that have been reflected in the guidance that we shared. On your last point there in terms of Some of the supply chain issues don't necessarily see that as a dynamic playing out or impacting our business today, but, you know, certainly something we're keeping an eye on. Got it. And then, you know, follow-up question, sales and marketing growth continues to expand here, accelerating year over year. Appreciate the commentary and your fair remarks, but could you just remind us where is the fastest-growing incremental spend today and what are the top go-to-market initiatives as we enter 2022? Yeah, so similar to what we shared, I think, in previous quarters in terms of how we're thinking about scaling the sales and marketing organization, I think our focus continues to be on building out the team to address larger portions of the enterprise segment of the market. We've had a lot of success to date in what we define as the emerging enterprise segment of the market, so continuing to broaden the team there to drive more success in that segment. And then as you think about all the different ARPU enhancing levers that we have, virtual brands, dispatch, rails, and now the wisely suite of products, there's a lot of opportunity to continue to expand within our customer base. So, again, growing the team to make sure that we have the right balance between team size and opportunity. That's really how we're thinking about investments in sales and marketing in the near term. Appreciate the call. Thank you.
spk03: Our next question comes from Matt Hedberg from RBC Capital. Please state your question.
spk05: Great. Thanks a lot for the questions, guys. Noah, you've had a lot of success this year.
spk04: I think you've added about 12,000 locations through the first nine months of the year. And it looks like what's implied in your Q4 guidance is a strong pipeline as well. I guess I'm wondering, as you sit here today, can you talk about sort of the quality of the new business pipeline, you know, versus maybe where a year ago. Obviously, you've had a lot of success selling remotely, too, over the past, really, two years. Do you think that your pipeline could actually see maybe an incremental benefit from salespeople maybe starting to travel a bit more? Yeah, I can actually take that one, Matt, in terms of, you know, sort of location trends. I think I would start answering that question by saying from a high level, I don't think we've ever been more excited about our sales and deployment pipeline, really on two fronts, in terms of new location ads, as well as the various upsell opportunities that have continued to emerge. And I think now with the addition of the wisely suite of products, obviously a lot of excitement there as well. So I don't think the... you know, the return to in-person selling is necessarily, you know, determinant of, you know, incremental sales activity beyond our current estimates. The team has done a wonderful job selling remotely, deploying remotely, and frankly, you know, building great relationships with our new and existing customers. So don't anticipate – you know, a material change as the, you know, sort of in-person sales process reignites. The team has done a great job to date. That's right. And then I guess that's for either of you. I don't think we heard, at least I don't recall in the recording, Mark's mention of a little pay this quarter. I know we've been talking about it a little bit the last couple of quarters and before you guys went public. Any thoughts on where we're sitting there? I know it's still, you know, a little bit out, but just sort of curious on the status of it there. hey matt this is uh noah so yeah still still early on track with what we shared with you earlier uh we're encouraged by what we're seeing with the the brands the locations that are live on olope in our pilot um hardened by the excitement from the the broader restaurant brand base and we have conviction that this is going to be another great contributor to arpu given our track record with finding product market fit and success in new product module sell through One update to share, we did hire Tor Opedal as vice president and general manager of payments within the quarter. And Tor's previous experience includes MasterCard, his most recent posting, and then Arby's before that. Tor has oversight of the development and the delivery of OLO Pay. and also broader accountability to all of OLO's payment products and relationships. So we're excited for him to bring his expertise to OLO and to OLO Pay. Thanks, Noah. Super helpful.
spk03: Our next question comes from Terry Tillman from TruWit Securities. Please state your question.
spk04: Hey, guys, this is Connor faster along for Terry. Thanks for taking my questions and congrats on the quarter. So to start, as we get back to normalcy, and I guess back to work, what are your thoughts on how volumes could trend from existing levels? I'm thinking about things like catering, office lunches, etc. Could that move the needle in any way maybe help maintain growth fatality? Yeah, so I can take that one. This is Peter. Great question. I think our, our thoughts around order volume trends, call it over the next few quarters, hasn't really changed much from what we thought or anticipated earlier this year. We always thought that digital orders, as in-person dining increased, as vaccinations increased in Q2 and Q3, that they would be impacted by uh by those developments and and that is that has been the case um what's been great though is that digital ordering has um really exceeded our expectations of the durability of digital ordering i think that is in large part um why you know we've we've experienced the revenue out performance over the past few quarters As we look ahead, we continue to believe that there is growth ahead for digital ordering. I think how that plays out in terms of revenue, I think one thing I would keep in mind is that through the first quarter of next year, we are still lapping difficult comps or challenging comps, given that if you think back to earlier this year, the first quarter of this year, this was pre-vaccination period. So I think as we kind of navigate through that period, at that point, you'll start to see more acceleration from a revenue growth standpoint and order volume standpoint. Okay, great, really helpful. And then just as a follow-up, on your partners, so with DoorDash, could you maybe share how much was driven in the quarter by that partner? And then also, could you maybe share a little bit more on the Uber Eats and dispatch announcement, maybe the implications of alcohol delivery? Thanks, guys. Yeah, I think in terms of the revenue contribution from DoorDash in particular, I think we disclosed that in the queue, so I would probably point your attention there. In terms of... Some of the more recent announcements last quarter, Grubhub utilizing the Rails platform, and more recently, Uber and Waiter utilizing the Dispatch platform. It's still early. I think that we are encouraged by the early interest of our customers in terms of enabling those partnerships and getting more locations enabled with Grubhub Rails and getting more locations enabled with Uber and Waiter on the dispatch side. I think how that plays out over time, again, is increased transaction volumes by sourcing more demand on the rail side as well as increasing driver availability on the dispatch side. So more to come on that topic, but really encouraged with some of the early signs. Thank you, guys.
spk03: Our next question comes from Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question.
spk04: Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair.
spk05: Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your question. Bhavan Suri from William Blair. Please state your
spk04: Hey, Belinda. This is Noah. So I think what we're seeing is that the restaurant industry, and we've seen this really over Olo's history as a company, the industry is going through this digital transformation. There was certainly a heightened urgency amidst the challenges of COVID-19 for restaurants to go digital. We're seeing other sets of challenges right now causing another sense of urgency, another moment of urgency, and really that's driven by labor and the desire to increase productivity at the store level and we're seeing this uh you know really play out in every segment but right now you know we still have restaurants operating six percent below pre-pandemic levels in terms of labor with some positive gains in the month of October But this is leading to restaurants wanting to do more with the labor that they do have and meet the needs of the consumer. And that's where Olo's solution, whether it's You know, Rails helping them avoid having to look at a series of tablets, whether it's dispatch, outsourcing, delivery, switchboard, outsourcing, phone ordering, or just in general, self-service ordering on the app, on the website, QR code in restaurant, kiosk in restaurant. All of these are ways in which we are serving customers. as a force multiplier for our restaurants. And certainly the desire to increase productivity is heightened at this moment and something that restaurants are always looking to do to best meet the needs of the customer and do so in the most profitable manner possible. Yeah, that makes a ton of sense. And the labor shortage is a really interesting driver. I guess let's touch on a competitive reminder briefly. You know, you saw venture blocks acquired by Pfizer and I guess, has there been any change in competitive environment? Has there been any indication that e-commerce players focus more down market, whether it's China, et cetera, to try to move up markets? Just some color on what you're seeing out there from a competitive perspective, especially given some of the acquisitions. Thanks. Yeah, I wouldn't characterize any of the activity that we've seen as competitive activity. There's certainly a lot of activity with regard to restaurant technology and deals in the restaurant technology space. Primarily, that activity has been in the SMB segment. I would characterize BentoBox as really focused on the SMB space. You mentioned Chow Now. We historically have had a great respect for Chow Now and vice versa, and not a lot of overlap. We're focused on the enterprise space and the emerging enterprise space, which we define, again, as the 500 to 100-unit restaurant brands that have that ambition of scale to be the next great enterprises of tomorrow. Chow now and others really focus on the smaller SMB players that don't fit that category. So we haven't seen any change in the competitive dynamic. I can say what is true is that we are more like the first scaler in the enterprise space, getting up to the milestone of 500 restaurant brands now exclusively on the Ollo platform, 76,000 restaurant locations, and building up the partner ecosystem on the other side to have this two-sided network that we love so much. This is something that is self-reinforcing and helps us to scale even faster. And as we look at new segments, we mentioned some of the ads in QSR brands. That segment is one that we've talked about as the largest by location, the largest by number of transactions. And we now have Bojangles, Carl's Jr., Checkers, Culver's, Dairy Queen, Jack in the Box, Crystal, Panda Express, Subway, Whataburger, and others. We're starting to really prove ourselves as the best partner for the QSR segment to come online and go digital. And that is a great segment of growth for us and one that is enterprising really by definition. Gotcha. Gotcha. Thanks, Nicola. Thanks for the candor. Really appreciate it. Nice job, guys. Thank you. Thanks.
spk03: Our next question comes from Sterling Audi from JP Morgan. Please say your question.
spk05: Hi, this is for Sterling. Thanks for taking my question. Guys, can you give me colors on, like, return to the store dining? Is that pushing out the implementation volumes, and how do you see that playing out in next quarter and early 2022?
spk04: Yeah, so specific to some of the trends we're seeing in regard to in person dining, I think where that's really impacting the business, albeit to a lesser extent than we had initially anticipated is within digital ordering. Um, and, um, you know, while while that has continued to evolve throughout the year, We have a variety of products and capabilities to also meet that need. Noah had touched on earlier the ability to power table-side ordering such that consumers can dine and transact at the table via QR code ordering and have the the meal run out to the table, kiosk ordering. These are all applications of the YOLO platform to accommodate the return to in-person dining. So in terms of how that trend is impacting implementations, we're not seeing that. Really, like I said, where we're seeing that more of a dynamic is just in overall digital ordering trends.
spk05: Okay, thanks. And then on the platform revenue, like, can you give sense on how the subscription transaction revenue mixes? Usually it turns around 50% but like, can you just pin down the number for that?
spk04: Yeah, I believe this quarter specific to platform revenue, subscription revenue accounted for about 47% of the mix with transaction accounting for about 53%, which I believe is consistent with what we achieved in the second quarter. Thanks. Thanks for the progress.
spk05: Yep.
spk03: At this time, we have no further questions. I'll turn it back over to Noah.
spk04: Okay, well, thank you all for joining us again today. I hope you can hear from the content of our prepared remarks, our responses to your questions, and our general tone. We've never been more excited about our position or our opportunity than we are today. So I want to say thank you to Team OLO for another great quarter. We have miles to go before we sleep. Until next time, be safe.
spk03: This concludes today's conference call. Thank you for attending.
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